Correlation Between IShares MSCI and Schwab Fundamental

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Schwab Fundamental at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares MSCI and Schwab Fundamental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares MSCI Emerging and Schwab Fundamental Emerging, you can compare the effects of market volatilities on IShares MSCI and Schwab Fundamental and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares MSCI with a short position of Schwab Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Schwab Fundamental.

Diversification Opportunities for IShares MSCI and Schwab Fundamental

0.83

Correlation Coefficient

IShares MSCI  Schwab Fundamental

Very poor diversification

The 3 months correlation between IShares and Schwab is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and Schwab Fundamental Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental and IShares MSCI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares MSCI Emerging are associated (or correlated) with Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental has no effect on the direction of IShares MSCI i.e., IShares MSCI and Schwab Fundamental go up and down completely randomly.

Pair Corralation between IShares MSCI and Schwab Fundamental

Given the investment horizon of 90 days iShares MSCI Emerging is expected to under-perform the Schwab Fundamental. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Emerging is 1.33 times less risky than Schwab Fundamental. The etf trades about -0.06 of its potential returns per unit of risk. The Schwab Fundamental Emerging is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,924  in Schwab Fundamental Emerging on October 8, 2024 and sell it today you would lose (26.00) from holding Schwab Fundamental Emerging or give up 0.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

iShares MSCI Emerging  vs.  Schwab Fundamental Emerging

iShares MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Schwab Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Fundamental Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with IShares MSCI and Schwab Fundamental

The main advantage of trading using opposite IShares MSCI and Schwab Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Schwab Fundamental can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Schwab Fundamental will offset losses from the drop in Schwab Fundamental's long position.

The idea behind iShares MSCI Emerging and Schwab Fundamental Emerging pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.